Apple in Talks to Upgrade Apple TV to Full Featured Set-Top Box

By Jim Tanous

Aug 16th, 2012 9:54 AM EDT

Apple is currently in talks with U.S. cable television providers to adapt the Apple TV device into a full-featured set-top box for viewing and recording live television, according to a report by the Wall Street Journal late Wednesday. The proposed device would merge Apple’s existing Apple TV online and local streaming capabilities with TiVo-like functionality for live television.

An Apple set-top box would act as an alternative to digital television receivers and digital video recorders that most cable subscribers currently rent from their cable provider for a monthly fee.

TiVo, which has offered a third-party video tuning and recording device since 1999, also charges customers a monthly fee, separate from the charge for a cable television package, in addition to an upfront cost for the hardware. It is unclear if a potential Apple product in this field would also charge a monthly subscription fee or if the company’s revenue will depend entirely on a one-time upfront hardware purchase.

The rumors of an Apple set-top box follow years of speculation about an Apple branded television set, which purported insiders claimed would incorporate Apple TV functionality with a radical new approach to content access, discovery, and control.

Wednesday’s report of Apple’s interest in a set-top box do not necessarily dismiss the possibility of an eventual Apple television, but it may lend support to the suggestion that Apple was having tremendous difficulty in securing content deals with major television providers and networks. An Apple set-top box, which merely acts as a front-end for existing cable infrastructure, may be far less threatening to the industry.

Apple currently sells significantly fewer Apple TV devices than its does with other consumer electronics products, moving “only” 1.3 million units in the last quarter. While it has improved significantly over time and receives generally positive reviews, the lack of live television capability has limited Apple TV’s mainstream appeal.

An improved Apple TV with access to cable television programming would significantly increase the device’s desirability, and Apple’s marketing and brand recognition may help it combat cable operators’ set-top box monopoly better than smaller companies like TiVo.

Apple CEO Tim Cook stated during the company’s Q3 earnings call last month that the Apple TV “will lead [Apple] somewhere.” An Apple set-top box, integrating Apple’s user experience, online services, and live television, will certainly be a nice place to be lead to.